Ovitz quarterbacks a football deal

CBS.MarketWatch.com

HOLLYWOOD (CBS.MW) -- Are you ready for some football? Two investment groups in Los Angeles -- including one headed by Tinseltown agent Michael Ovitz -- believe that they are.

They stand bearing financial gifts and investment plans, hoping to curry favor with the elusive powers behind the sports-industrial complex that is the National Football League. All this in the cause of making Southern California the home of the NFL's 32nd team.

Only one group can win, but both groups could lose. Not to mention the uncertain fate of a little town by the freeway.

"I'm all for football, and, as long as it's not going to be out-of-pocket money, I'll support it. Otherwise, no."

Carson sports fan

The NFL has a choice to make. Will the league choose:

Houston, a city that just lost its team to Tennessee

L.A. Plan No. 1, which includes a renovated Memorial Coliseum, ex-home of the departed Raiders and Rams, or

L.A. Plan No. 2, which would transform modest Carson, Calif., into the Green Bay of the West?

L.A. Plan No. 2 seems to have the Southern California mystique necessary for the winning score because the quarterback calling the big plays is Ovitz. Ovitz is the former president of the Walt Disney Co. (DIS)
DIS, +0.17%
, founder of Creative Artists Agency and now a wide-ranging free safety, conducting talent raids around town for his new company, Artists Management Group.

Ovitz has been looking to bring football back to Los Angeles for over five years, according to his "point man" for the massive project, Peter Levin, but he could never find the right site. Then an Ovitz acquaintance, Herbert Glimcher, mentioned he was prepared to build a shopping mall on a 157-acre plot of land that sits south of the L.A. International Airport at the intersection of the 405 and 110 freeways. It is a perfect midground between the commerce of L.A. and the sprawl of Orange County. Bingo.

The planned 1.5 million-square-foot Metro Mall has since morphed into "The Hacienda," a 77,400-seat stadium with California mission bell towers that will ring with each touchdown and siesta skyboxes with balconies, plus a retail/entertainment complex with open-air courtyards and Spanish fountains. It could be the largest development in NFL history and certainly the defining structure in this otherwise nondescript blue-collar town.

'Very complicated'

"There is a lot of misinformation going around and a lot of rumor, and it's a very complicated deal," says Carson City Manager Jerry Groomes. "We have not been in a position to come out with a lot of information, because it just wasn't solid."

Groomes and other city officials had just concluded a town meeting attended by hundreds of citizens wondering what pro football would mean to their little town. When the meeting ran long and there was no time for questions and answers, the atmosphere became heated, and another meeting was promised where everyone would have their say.

One figure sticks in the mind of those in attendance: Carson is going to be financially committed for $165 million dollars in bonds, not to exceed $185 million. "That money represents funds already committed to the original mall project, plus stadium monies that would support bonds that will be issued. But no money will be committed from the general fund or from the general citizenry," says Groomes.

Carson is going to be financially committed for $165 million dollars in bonds, not to exceed $185 million.

One brochure describes Carson as the nation's most ethnically diverse city. Whatever its diversity, Carson is mostly known for being the home base of the Goodyear Blimp. If this deal goes through, more than the mission bells will be ringing. The people of Carson aren't rubes, just naturally suspicious of a big deal that sounds too good to be true.

"I'm all for sports: I'm a 20-year season ticket holder for the Dodgers," says one 60-ish woman attending a city council meeting. "I'm all for football, and, as long as it's not going to be out-of-pocket money, I'll support it. Otherwise, no."

The business of professional sports is daunting enough for big cities, and yet the town of Carson is not afraid. "It's all a matter of what's negotiated," says Groomes. "We want to make sure we get our investment covered and we're protected so no money is at risk and we stand to benefit from the profit, like the ownership group. The city council has to be sensitive to the will of the people while being careful not to blow a great opportunity for the city."

Peter Levin agrees this as a unique opportunity: "We believe the Hacienda venture is by leaps and bounds in the greater good for the city of Carson. They've been wildly supportive of it to date."

Lions on prowl

The ownership group, or L.A. Football LLC and L.A. Sports LLC, is an impressive pride of lions. At the top are the visionary and power broker, Ovitz, and the man with the land, Glimcher. At the next level of investment is Gabriel Brener, CEO of Galco Inc., a major player in the Hispanic community; Ron Burkle, majority owner of Yucaipa Co, which owns Ralph's and Food For Less Markets; Gary Wilson, chairman of Northwest Airlines; and Ted Forstmann, chairman of Gulfstream and senior partner in investment bank Forstmann & Little.

It wouldn't be an Ovitz deal without the stars that made his reputation as an agent extraordinaire and as a supreme packager of talent. If successful, this ownership group will have as many celebrities in the owners box -- designed like a mission-styled home -- as on the gridiron.

In addition, according to the group's outside counsel, James Ellis, "the Bank of America has indicated they are prepared to arrange $400 million dollars in financing."

So there is the package: $165 million from Carson, $200-plus million from the ownership group and $400 million from B of A. It's a lot of money to invest in this freeway town, and they will probably need more.

Money problems could manifest as a result of the mysterious, free-floating franchise fee charged by the league, or the need for a few quick hundred million dollars could be the result of the unpredictable and capricious nature of the owners in the NFL.

Big fee

ESPN football expert John Clayton is a senior writer for ESPN Magazine and a commentator and reporter for the sports cable and radio networks. Clayton says the franchise fee for a Los Angeles team will be somewhere between $750 million and $900 million. Worse yet, Clayton senses the league may be willing to launch a bidding war between the two competing L.A. groups or to choose a site that is to the league's liking and then set one group against the other to see who emerges with a deal. Football is, after all, America's favorite contact sport. Even the owners can appreciate a good hard hit.

The new math of the NFL asks the prospective owners to find the value of "x," with "x" being the arbitrary, unspoken franchise fee. The new Cleveland Browns' franchise fee was $530 million, but the league felt that it owed Cleveland a favor because it let the old Browns move to Baltimore. No favors for the Redskins, however: The price of the recently sold Washington, D.C., team was $800 million. With L.A.'s potential as the league's top market, the price of acceptance into the exclusive club could be as painful as a crossing pattern into the domain of a nasty linebacker.

There is another headache, or maybe two, says Clayton: "The league would love to award the new team to Los Angeles, but the cleanest deal is with Houston, where the plan includes public money voted for football acquisition by a referendum."

Then, there is the matter of Al Davis, owner of the Oakland Raiders, who is still mad at the NFL for denying him a stadium deal near Hollywood Park that would have kept his Raiders in Los Angeles. Davis feels the league owes him money because a team in Oakland is worth less than a team in L.A. "The league says his argument is hogwash," laughs Clayton, "but Davis' attorney, ex-San Francisco Mayor Joe Alioto, is undefeated against the NFL."Davis is poised to go to court again, says Clayton, where he wins with more regularity than on the field.

Ovitz and his group are used to playing with the big boys, and they are accustomed to the rough-and-tumble. The city of Carson is accustomed to watching 18-wheelers roar by on the freeway. This is a city whose recent dreams went no further than another SoCal shopping mall until the wizard of Ovitz upgraded their dreams from month-end sales to Super Bowl and Lombardi trophy wins -- dreams that until now had been reserved for towns like the Big Apple and Mile-High Elway Country.

So does this race to the end zone spell financial disaster for little Carson? "We are not going to have any significant exposure in this plan," claims Carson City Attorney Darrell Piper. "That is the foundational rule that we are following while putting this deal together. This plan is an investment based on the revenues that are going to come in from the stadium and the adjoining mall, and we promise the citizens of Carson that we are not putting at risk the city's general fund."

Even so, Piper wants to see the Ovitz ownership group money and the bank's money first. "It's the only way to proceed," he said. "We walk together, or we don't walk at all."

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